Filing Chapter 13 – How Payments Are Determined

When you file for Chapter 13 bankruptcy in Florida, your monthly payment amount is determined by several factors, including your income, expenses, debts, and the value of your nonexempt assets. The process involves a detailed examination of your financial situation to create a repayment plan that pays off all or a portion of your debts over a 3 to 5-year period. Here’s a closer look at how your monthly payment is calculated.

Income

Your current monthly income is compared to the median income for a household of your size in Florida. If your income is above the median, you’ll likely be on a 5-year plan. If it’s below, you might qualify for a 3-year plan. Your disposable income, which is what remains after deducting allowed living expenses and payments on secured debts, plays a key role in determining the payment.

Expenses

Allowed living expenses include necessary costs such as housing, food, clothing, transportation, and healthcare. These are determined based on IRS standards and actual expenses. The difference between your income and these allowed expenses helps determine how much you can pay towards your debts.

Debt Types

Your debts are categorized into priority, secured, and unsecured debts. Priority debts (like child support and certain taxes) must be paid in full. Payments on secured debts (like mortgages or car loans) must continue if you want to keep the collateral. Unsecured debts (like credit card bills) are paid with whatever income is left over after other obligations are met. The total amount you owe can influence your monthly payment, especially if you have to pay back a significant portion of unsecured debts.

Nonexempt Assets

If you have nonexempt assets (assets that exceed the exemptions allowed in Florida), you might have to pay an amount equal to their value to your unsecured creditors through your plan.

Administrative Costs

These include the trustee’s fees and any administrative court costs associated with filing for Chapter 13. The trustee’s fee is usually a percentage of your monthly payment.

Duration of the Plan

The length of your payment plan (3 or 5 years) also affects the monthly payment amount. A longer plan can spread out payments and potentially lower the amount you pay each month.

To accurately determine your monthly payment, it’s essential to provide comprehensive and accurate information about your financial situation. Many people find it helpful to work with a bankruptcy attorney who can guide them through the process, ensure that their payment plan is as favorable as possible, and help navigate the complexities of bankruptcy law.

If you would like to know more about how Chapter 13 works and how it would affect your current financial situation, please contact us, and we can schedule a free consultation to discuss it.